Heads up for ECM, BPM & BPO software executives globally
Experience is a comb given to men once bald
1 February 2010Most executives in business would agree that there's no substitute for experience. If you sail with somebody who knows where the rocks are hidden beneath the water, you can avoid being shipwrecked.
Experience may not be the kindest of teachers as it can be very costly but, once paid for in hard work, stress and, sometimes blood, it beats theory every time. The problem in this formula of EXPERIENCE = SUCCESS, is that of TIME. Does your business have the time and the cash to find the right route from the trial and error of experience?
Unfortunately, the lessons we learn in business come in the reverse order to the way we are taught in school. When at school, you are taught a lesson by the teacher and then are given a test. In business, it is the reverse; you are given the test first and then learn the lesson afterwards. This reversal costs time and money and can, on occasions, kill a business.
The ideal solution would be to have access, on a short term basis, to highly experienced and specialist executives, with the ability to coach or mentor business leaders for specific projects. In that way, the in-depth knowledge of the business could be combined with the wisdom of experience to speed the growth of the business whilst reducing the risk of failure. It is to this end that Document Boss has developed the Equity Value Accelerator service to enable companies in this sector to increase their rate of profitable growth by leveraging the experience of talented and knowledgeable executives.
The lack of specific knowledge and experience can be seen very clearly in the area of mergers and acquisitions. Study after study has shown, for many years, that companies have a high chance of failure when acquiring, yet very little has changed in the approach of companies to their M&A process.
| Study |
Size of Sample | Time Frame | Failure Rate | Measurement |
| AT Kearney | 115 | 1993 - 1996 | 58% | Share price relative to industry index |
| Byrd & Hickman | 128 | 1980 - 1987 | 66% | N/A |
| Coopers & Lybrand | 125 | 1996 | 66% | Revenues, Cashflow, Profitability |
| JP Morgan | 116 | 1985 - 1998 | 44% | Excess return relative to local market |
| KPMG | 107 | 1996 - 1998 | 53% | Share price relative to industry index |
| Mark Sirower | 168 | 1979 - 1990 | 65% | Absolute returns for up to four years |
| McKinsey | 116 | 1987 | 61% | Cost of capital in three years |
| Mercer Management | 215 | 1997 | 48% | Share price relative to industry index after three years |
| Michael Firth | 224 | 1972 - 1974 | 79% | Share price in following 4 years |
| Mitchel/EIU | 150 | 1988 - 1996 | 70% | SelF assesment: Would not buy again |
Companies commonly fail due to one or a combination of the following reasons:
Some Common Problems:
- Keyhole vision fails to deliver the “right” opportunities to achieve business/ shareholder goals
- Failure to uncover the truth about acquisition targets (until too late)
- Wasted time and money spent on looking at opportunities that should have been qualified out early in the M&A process
- Lack of an effective M&A strategy due to poor and out of date market intelligence
- Search processes that should never have been started and which waste time and money looking for a “five legged sheep”
- Exorbitant management time and cost to integrate a company that should not have been acquired
- Acquisition decisions being made based upon a simplistic thumbnail of multiples of EBITDA valuation methodology and not founded on commercial opportunity and organisational fit.
- Poor acquisition integration process that results in a failure to retain key employees and thus, the loss of the intellectual wealth of the organisation
To say there’s a better way in the light of such poor statistics puts me in danger of stating the blatantly obvious. Maybe the question should be, ‘Why, despite such evidence, companies are still failing in such a critical and costly business operation?
If you are looking to acquire or sell in this sector and want to avoid the above problems then please read further